How do real estate startups start? (WeWork / GreenDesk)

by Smashtoblack1. Posted on Sep 11, 2020    1    8


Hey everyone,

I can't seem to find anything online, but I would love to know how Adam Neumann and his co-founder started GreenDesk, and eventually WeWork. Did they get any investments? Did they have cash themselves?

It just seems like an incredibly costly startup, and I was wondering how in the world anyone starts a real estate startup. There's quite a few more, but those were the main examples. Thanks!


Comments

sprfrkr 1

One of the most listened to podcasts goes through their origin story: How I Built This (We Work): https://radiopublic.com/HowIBuiltThis/s1!d59cf

0x7fEeD 1

Adam Neumann was a good bullshitter. He convinced investors to dump billions into his pipe dream

magnumix 2

Say you have an idea, you always want to vett out that idea on the smallest scale possible.

At its core, WeWork's business model is really about the margin between the sum of the subleases in excess of the cost of the master lease. In all likelihood, they started with a single commercial lease, and began cultivating a community to sublease with them. Once they were able to recuperate at least the cost of their lease, approach investors who would likely be other commercial property owners.

If I were the owner of a commercial property, I would certainly court WeWork with preferrable prices - possibly even be an 'investor' in the form of equity in lieu of rent. The idea here being that I can get a cut of the subleases. If a new startup can prove to me that they are able to pay me the entire lease I want, and possibly in excess of, I'm listening.

TL;DR: WeWork's startup costs were likely the cost of the original lease + supporting activities to find subleases. This was in all likelihood their own pocket and/or friend and family round. I don't know of a single investor that would give someone else money without "skin in the game."

  Smashtoblack1 2

Thanks a ton. That makes sense. Go to the property owner with leverage first, and spend as little as possible to prove the model.

This is an excellent comment.

Analyst-Suspicious 2

Have rich friends.

It's a lot easier to convince people you hang out with to invest in your idea than it is to convince complete strangers. When "friends and family" can get you a few million, a lot of startup ideas become easy to execute since you can hire all the talent you need.

  Smashtoblack1 1

Yeah, makes sense. Well, i'm 22 and have some rich friends (went to a good CS school) but i'd really be convincing their parents I suppose. I'll have to network better around older people who have made it in some way, and have cash to spare.

I don't even know where to start though, all my friends are just software engineers or starting companies. I have very ambitious friends, but no wealthy ones yet.

alreadytaken0 2

This is from memory so excuse me if there are any small errors -- there's a great podcast called WeCrashed about the story of WeWork. Basically, Neumann started a small company called Green desk that was more or less the same thing, then he sold that company and started WeWork, raising around $7MM at seed. He opened 1 or two locations in NYC, then raised a pretty large A round, around $17MM iirc and then a $40-50MM B Round less than a year later -- at that point it was off to the races...until it wasnt!

  Smashtoblack1 1

Wow this is exactly what I was looking for. Thanks a ton.